Market Pull for T Bill Investments: Reflection of pervasive uncertainty

By Paneetha Ameresekere | Published: 2:00 AM Dec 9 2021

By Paneetha  Ameresekere

Yesterday’s weekly Treasury (T) Bill auction was a reflection of the uncertainty gripping the market, with the latter’s preference to invest in riskless, but low returns T Bills, rather than invest in the lucrative private sector, the engine of growth.

Consequently, Central Bank of Sri Lanka (CBSL) accepted 165.11 per cent (Rs 29,719 million) vis-a-vis the original issue of Rs 18,000 million T Bills of 91 day maturities offered, at a weighted average yield (WAY) of 7.05 per cent, a week on week (WoW) fall of 18 basis points (bps).  

This phenomenon of CBSL accepting over 100 per cent of the offers made for the 91 day maturities in order to artificially maintain a low interest rate regime has been going on for the past 36 consecutive weeks to yesterday.

Meanwhile, CBSL accepted 131.92 per cent (Rs 31,661 million) vis-à-vis the original offer of Rs 24,000 million of 182 day maturity at a WAY of 7.84 per cent, down 13 bps, WoW and that of the benchmark 364 day maturity, a miserly 19.25 per cent (Rs 4,620 million) of the original offer to artificially compress rates amidst a sea of sustained inflationary pressure and uncertainty, compared to its original offer of Rs 24,000 million at a WAY of 8.11 per cent, down, a measly one bp, WoW.

CBSL’s recent history of controlling rates at least with regard to the 364 day maturities, by selling only spartan amounts, was a practice that began 46 weeks ago, starting with the weekly T Bill auction of 26 January.

Subsequently, CBSL sold the full complement of Rs 66,000 million worth of T Bills offered to the market yesterday, but not in the original quantities earmarked for the respective maturities in question. 

Meanwhile, CBSL also has to repay maturing T Bills totalling Rs 50,880 million to the market by tomorrow. Their splits are Rs 29,869 million worth of 91 day maturities, Rs 3,439 million worth of 182 day maturities and Rs 17,572 million worth of 364 day maturities, 

By Paneetha Ameresekere | Published: 2:00 AM Dec 9 2021

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